Capital Gains Taxation?

Question

I am a proud capitalist. Considering that capitalism inherently distributes wealth disproportionately among the citizens of a particular society, does a capital gains tax that is much lower than the income tax further contribute to disproportionality of wealth accumulation? I believe in a flat taxation of income. Why shouldn't capital gains be taxed at the same rate as an individual's income? After all, income is income....right? Can anyone make the argument that a capital gains tax that is the same as the income tax would discourage investment? Investors will still try to maximize their investment's earnings despite the rate of taxation. Also, equalizing the capital gains tax with the income tax would increase revenues from the wealthiest and thereby decrease the tax burden of those not of the "investor class". Do you agree? If not, why?

Answer 1

you're right; capital gains tax should at least be equal with income taxes. as far the wealthiest paying those taxes to redistribute, it won't happen, because the wealthiest don't pay taxes...they shelter everything through phony losses. however, the less than wealthiest will be paying more taxes that will help redistribute tax burdens. The problem is trying to convince people that the consequences of this tax increase is better than not, is almost impossible because consequences live in the world of speculation and anyone can make a contrary argument to you and if your rich and powerful your argument will always win.

which means you have to make the moral argument. in this case it's just a matter of fairness. earned income should be taxed lower simply because someone had to earn it. and unearned income or passive income has value simply because someone in the earned income bracket created the value to begin with. So, instead of giving a break to the earners...it's the opposite and the break is givien to the unearners. However, the moral argument will quickly be confused with the consequential one and someone will come along and say that lower capital gains taxes will lead to more investments which will lead to more jobs, which will lead to more earned income taxes.

this sounds like a plausible argument, but it's really just specualtion, because there are other countries that would prove the opposite.

Answer 2

A lower marginal rate on the captial gains tax would, on the surface, appear to redistribute income is a disproportionate manner, as those who are impacted by it tend to be more wealthy to begin with.

However, you are correct that investors will maximize earnings, although the tax rate would be considered. As is, I think the tax rates are in a state of velleity - if the capital gains tax were say 50%, that means your investments would have to work a LOT harder, especially so when considering that much of the gains investors enjoy stem from exploiting the mania of those buying in to a 'hot' stock.

There would likely be a chilling effect of some sort if the capital gains rates were raised to coincide with individual rates.

I'm against a flat tax generally because it removes a great deal of the manipulative ability from the government.

It also means a huge number of unemployed accountants.

Answer 3

Capital gains taxes do not need to equal income taxes. The problem with your reasoning is that you think the rich people pay taxes - at all.

Rich people dont pay taxes, there is no way around it, if you wanted to fix things you would first have to start by making rich people pay taxes.

Take something simple like 2 + 2, if you asked an accountant for a big name company what 2 + 2 equals do you think they would tell you the answer is 4?

They wouldnt, they would respond "What do you want 2 + 2 to equal?"

Even if it were possible to tax the rich, they still wouldnt get taxed. They would just take their money elsewhere, move to some random country and setup shop there, and they still dont pay taxes, and in the mean time hundreds of thousands of americans lose their jobs.

Also, capital gains are already taxed entirely too heavily. If someone risks $100 on the stock market, and then they come out with $150, they should get that whole $150, discouraging people from investing in the future is what leads to a lot of problems we have already.

Problems like people who spend all their money and live paycheck to paycheck because they have no hope of beating inflation AND capital losses AND the capital gains tax when trying to start investing to give themselves a better tomorrow by sacrificing today.

Also, if you could make rich people pay more money, they would have to get that money from somewhere, such as by laying off workers.

To answer your questions directly:
1) The whole argument is flawed and I completely disagree with everything you said.
2) The investors shouldnt have to pay more for sacrificing today for a better tomorrow.
3) Hurting rich people and/or investors does not make the problems of the middle class better, it makes it much worse.

Impressario Raiddinn the Beatdropper